HAVE YOU BEEN MADE REDUNDANT?
Read all about your legal rights and how we can help
Being made redundant can be a very stressful event.
Especially when heading into a recession and unemployment is increasing. Covid-19 has proven to be a massive catalyst for redundancies.
There must be legitimate reasons for your redundancy
Common reasons for redundancy include:
- Restructuring of a business to fewer staff or by using more outsourcing
- The Business needs to close down
- Relocation of the Business
- Increasing use of technology
You can only be made redundant if your role is no longer required. The redundancy consultation process will usually last several weeks.
At the start of the redundancy consultation period, your employer may offer voluntary redundancy.
Where deeper cuts are needed, it is important that your employer acts transparently and in accordance with the ACAS guidelines, to ensure fairness and transparency.
As such you need to make sure you know your redundancy rights.
What Are Your Redundancy Rights?
- You have the right not to be unfairly treated. In practice, this means the right to be consulted and the right to be offered suitable alternative employment where possible.
- The right not to be unfairly dismissed only applies where you have completed two years of service.
- If you have completed two years of service, you have the right to take time off to look for alternative employment or arrange training.
- If you are dismissed for redundancy, you have the right to receive a Redundancy Notice, subject to the statutory minimum notice.
- If you have completed two years of service, you have the right to receive a statutory redundancy payment.
- If your employer is insolvent or refuses to pay you, you have the right to apply to the National Insurance Fund for unpaid “employer’s payments”.
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Can You Challenge Your Redundancy Selection?
If the whole business is closing down, then there is nothing you can do about your selection. If, however, some of the workforce are being kept on and you are not, you are perfectly entitled to raise questions about why you have been selected for redundancy over other employees.
If you think that your employer has not treated you properly, you can challenge the fact that you have been selected for redundancy. It’s best to talk to a solicitor for guidance.
What Is The Redundancy Criteria Based On?
Your employer should look at objective factors in determining redundancy selection. This could include:
- Length of Service
- Disciplinary Records
- Appraisal Scores
- Sickness records
- Additional responsibilities taken on (First Aid, Fire Marshall etc)
Your employer must not base their decision to make you redundant on the grounds of age, sexual orientation, marital status, gender, race, disability, religious beliefs, membership of a trade union, maternity or paternity leave, pregnancy, working pattern or whistleblowing.
If you feel that you are being treated unfairly, contact us now by using the ‘Make a FREE enquiry’ HERE> We are open from 8am – 8pm during the week and from 9am to midday at weekends.
How Much Redundancy Pay Will You Receive?
The redundancy pay calculation, depends on your age, length of service and salary. It is calculated by first determining the period during which you were continuously employed, and which ends on the relevant date of termination of employment. You then, count backwards from the relevant date, allowing the “appropriate amount” for each complete year of continuous employment.
The appropriate amount is equal to:
- One and a half weeks pay for each complete year of service in which the employee was aged 41 or over at the beginning of the year.
- One weeks pay for each complete year of service in which the employee was aged 22-40 at the beginning of the year.
- Half a week’s pay for each complete year of service in which the employee was under the age of 22 for any part of the year.
Weekly payments are currently capped at £525. The maximum amount of statutory redundancy pay is limited to £15,750. It is possible that your contract will entitle you to receive more than this.
If your total redundancy package comes to less than £30,000, it will be tax-free.
What are Settlement Agreements?
A Settlement Agreement is a voluntary agreement made between you and your employer to compromise your contractual and statutory claims on the termination of your employment.
The agreement will deal with things such as: termination payments (which may be tax-free sum), holiday, bonus, use of private vehicle, pension and many other things.
In agreeing to the terms, your employer will make a payment to you upon the basis that you agree not to bring certain claims, for example, unfair dismissal, discrimination or breach of contract.
Although it is a voluntary process, once signed it is binding in law. As such your employer will insist that you take independent legal advice. Your employer will also usually contribute towards the cost of that advice.
SETTLEMENT AGREEMENT FAQ’s
WHAT ARE SETTLEMENT AGREEMENTS?
A settlement agreement is a voluntary agreement made between you and your employer. It limits any potential claims and to draw a line under things once your employment comes to an end.
The agreement deals with things such as: termination payments (which may include a tax free sum), holiday pay, bonuses, use of any private vehicle, your pension and many other things.
After you agree to the terms, your employer will make a payment to you on the basis that you agree not to bring certain claims, for example, unfair dismissal, discrimination or breach of contract.
Although it is a voluntary process, once signed by the parties it is binding. As such it is sensible that you take independent legal advice. Your employer will usually pay the cost of the advice.
WHAT ARE THE BENEFITS OF A SETTLEMENT AGREEMENT?
Settlement Agreements offer certainty to you and your employer. It ensures a clean break. You will have a clear understanding of payments to be made, often with an agreed job reference. Your employer will have the certainty that there will be no future claims.
WHEN SHOULD SETTLEMENT AGREEMENTS BE USED?
Settlement Agreements are now very common, especially when dealing with executive positions. Even when things are dealt with amicably, they often used. They are also used during processes such as redundancies and disciplinaries.
WHAT DOES “Without prejudice & subject to contract” MEAN?
You may see “Without prejudice & subject to contract” in communication such as e-mail or a letter when dealing with a settlement agreement. It means that any discussions or communications used in the process cannot be relied upon in any subsequent tribunal. It allows the parties to communicate freely with fear of repercussion.
“Subject to contract” means that the settlement agreement will not be binding unless it has been signed by both parties.
HOW LONG DO I HAVE TO AGREE TO THE TERMS OF A SETTLEMENT AGREEMENT?
There is no set time limit. However, ACAS gives a code of practice which states that you should be given at least 10 days to consider the terms of your settlement agreement. If more time is needed, this is usually given by the employer within reason.
WHAT CLAUSES ARE USUALLY INCLUDED IN A SETTLEMENT AGREEMENT?
Arrangements on Termination:
This deals with the arrangements in the period leading up to and including your termination. It also confirms the payments that will be made or have been made to you over that period. These payments arise under the contract and will be taxable in full in the usual way.
If you are going to receive any bonus or commission payment, this should be specified in the agreement. Your employer may also wish to specify what payments you will not be receiving.
It will also include your “termination date” and whether you will be expected to work your notice period or be put on “garden leave” (Yippee!!)
This will set out the various payments to be made to you and when. It will make reference to a “compensation” payment which is usually paid free of tax up to the first £30,000.
This clause deals with any continuing benefits in kind previously enjoyed under your employment contract, such as private medical insurance or motor vehicle.
Care should be taken in relation to wording for pension compensation. There will be different considerations depending on the type of scheme of which you are a member and there are also tax issues to consider.
The clause usually requires the company to notify the trustees or administrators of the pension scheme of the termination of your employment. This is so that they are aware that the company will no longer be contributing to the scheme.
It is usual for your employer to make a contribution to your legal fees associated with the Settlement Agreement. The going rate may vary depending on locality and complexity. Most are between £300 and £500. For board-level terminations, particularly where transfers of shares are involved, a much greater contribution may be considered reasonable.
Waiver of Claims:
This is where the parties will agree to waive the right to waive a future claim. It is not possible to waive all statutory claims. It is common for an employee to waive any potential personal injury.
This clause should only be included if you have brought a tribunal claim against your employer.
Your employer will want to ensure that the tribunal is notified of your settlement and that the claim is properly withdrawn by you.
This provides protection for your employer in the event that HMRC pursues it for further tax or employee NIC’s on your termination payment
Company Property and Information:
This clause provides that you return property belonging to your employer, and to delete any information relating to the business and its contacts that might exist on your electronic devices and on third party servers such as cloud storage.
Employee Warranties and Acknowledgements:
Here, you are stating that you are not aware of any circumstances that would justify your summary dismissal. If, having made the termination payment and any payment in lieu of notice (if relevant), your employer discovers that this is not true, it ought to be able to recover those monies from you.
There is usually no obligation on an employer to provide you with a reference. Your employer may prefer not to offer an agreed reference in the first instance. In most instances however, it is advisable to make sure that one is attached to the Settlement Agreement.
Resignation from Offices:
If you are resigning from any directorships, your employer should check the relevant articles of association and may require you to sign a resignation letter, a draft of which is usually attached as a schedule to the settlement agreement.
If appropriate, you may be required to sell any qualifying or nominee shareholding to someone nominated by your employer.
Where there are existing restrictive covenants in your contract of employment, these will likely be re-affirmed. Careful consideration is needed to ensure that these are reasonable and not too onerous as they may be challenged in court.
Confidentiality and Announcements:
Such clauses will usually include:-
- Protecting the employer’s confidential information.
- Ensuring confidentiality about the settlement agreement and the circumstances of your departure.
- Listing exceptions to confidentiality, in particular to ensure compliance with regulatory requirements about non-disclosure agreements.
- Catering for potential tax issues arising from post-termination obligations of confidentiality.
- An agreed announcement about your departure
The purpose of this clause is to ensure that neither party can argue that anything said in negotiations, or in any other document, forms a term of the contract. If there are other documents that are intended to be given contractual force, they should either be in a schedule to the agreement or specifically referred to in the entire agreement clause.
A Jurisdiction Clause enables the parties to agree at the outset of their contractual relationship which countries’ courts are to have jurisdiction to hear disputes arising from the contract.
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